Kaleyra, Inc. (NYSE:KLR) Q4 2022 Earnings Call Transcript February 15, 2023
Operator: Good afternoon. Welcome to Kaleyra’s Fourth Quarter and Full Year 2022 Earnings Conference Call. After the market close, Kaleyra released unaudited results for the fourth quarter and full year ended on December 31, 2022. The press release as well as a replay of today’s call can be found on the company’s Investor Relations website at investors.kaleyra.com. Please view the release for additional information on what will be discussed today. Joining us today are Kaleyra’s Founder and Chief Executive Officer, Dario Calogero, Chief Financial Officer, Giacomo Dall’Aglio and VP of Investor Relations, Colin Gillis. Following their remarks, we will open the call for your questions. I would now like to turn the call over to Kaleyra’s Vice President and Investor Relations, Colin Gillis. Sir, please proceed.
Colin Gillis: Thank you. Before we begin, we’d like to remind everyone that during today’s call, management will be making forward-looking statements. Please refer to the company’s SEC filings, including the company’s annual report on the Form 10-K for a summary of the forward-looking statements and the risks, uncertainties and other factors that could cause actual results to differ materially from those forward-looking statements. Kaleyra cautions investors not to place undue reliance on any forward-looking statements, the company does not undertake and specifically disclaims any obligation to update or revise the statements to reflect new circumstances or unanticipated events that occur, except as required by law. Throughout today’s press release and on the call, we’ll refer to adjusted gross profit, adjusted gross margin, adjusted EBITDA and adjusted earnings per share.
These metrics are not determined in accordance with generally accepted accounting principles. A definition, calculation and reconciliation to the financial statements of these non-GAAP measures can be found in the tables included in our press release. We believe these non-GAAP measures of Kaleyra’s financial results provide useful information regarding certain financial and business trends and the results of operations. Now I’d like to turn the call over to Dario for an overview of Kaleyra’s fourth quarter. Dario?
Dario Calogero: Thank you, Colin, and thank you to everyone for joining us here today. Our fourth quarter started the next phase of forward momentum for Kaleyra, with revenue exceeding the upper end of our guidance range as we build on our existing customer base, developing new valuable enterprise partners and gain success higher-margin communication channels. The fourth quarter was highlighted by record revenue of $93.7 million, an increase compared to the $90 million in the year ago period. When adjusted for fourth quarter 2021 foreign exchange, the quarterly revenue would have been $97.7 million. Fourth quarter revenue showed a healthy seasonality with over a 10% sequential increase when compared to the third quarter of 2022.
Results for the fourth quarter also exceeded the stated guidance range of $86 million to $90 million. Full year 2022 revenue marked a record year, increasing 26.7% to $339.2 million from $267.7 million in the comparable year ago period or 32% to $353.3 million when using fiscal year 2021 foreign exchange rates. Full year and quarterly record revenue was driven by growth with existing customers, ramping volume with new customers and the cost and focus on the enterprise businesses that deliver a large amount of volume of communication. As we discussed previously, at Kaleyra, part of the way we measure success is with the following key operating metrics: one, billable messages; two, voice calls; and third, dollar-based net expansion. For the fourth quarter, we delivered 12 billion billable messages connected over 2.2 billion voice calls and the dollar-based net expansion rate was 98.1%.
But looking at Kaleyra’s top 30 customers, our dollar-based net expansion rate was 139% in the quarter. In 2022, our technology managed 51.5 billion messages and 8.1 billion voice calls, utilizing our relationship with over 1,600 telecom operators including all Tier 1 U.S. carriers directly connected. When we discussed that Kaleyra is a global business with scale, the 51.5 billion messages delivered in 2022 is over 5 million messages delivered per hour for every single hour of the year. As it relates to margin expansion in order to change sales mix with products with higher profitability, we identified 3 different strategic initiatives to help our customers in delivering safe, effective and efficient communication, focus on global enterprises, focus on global connectivity and focus on intelligent CPaaS new products.
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During the fourth quarter, we managed to make significant progress on all the 3 initiatives. We announced a strategic partnerships with global enterprises like Amazon and Oracle and with telecom operators in key markets like PLDT in the Philippines and Claro in Central America. We’ve also achieved significant growth in our Registry business with the Campaign Registry and we acquired new customers for Kaleyra Video, like Flowe in Italy, and we launched new products such as Chatbot that will help our customers in developing conversational capabilities across all the communication channels. While we are positive on the quarterly results, we are also aware of the uncertain economic environment facing global companies in 2023, including Kaleyra.
The management team has created a value creation program that started in January and is focused on reducing cost to invest in the 3 strategic programs that could drive business a tighter margin. Our Chief Financial Officer, will have more comments on the program shortly. To finish this portion of the call, it has been 2 decades since Kaleyra has been section, and I’m very proud of how far we as a company have come. From a start-up to our current status as a global leader. I look forward to continuing to be part of the bright future I know is ahead. With that, I will now turn the call back over to Colin.
Colin Gillis: Thank you, Dario. Brands want to communicate with their customers and are going to use multiple channels to do so. We are a Communication Platform as a Service. As our customers’ needs change, we change with them in the most cost-effective manner, giving our unique ability to be agile. This is very much a fragmented market with only a few global players, which is why our partnership with over 1,600 operators and direct connectivity in over 100 countries is an advantage to our enterprise customers that can use Kaleyra as a single source to leverage their global needs. Regardless of the economic environment, this industry is expected to grow but it’s hard to judge the long-term growth curve as we take into consideration economics across the globe.
Giacomo is going to run through the financials in detail. But before he does, I’m going to address our first quarter expectations. We remain focused on delivering on our promises throughout the year. We expect the company to grow revenue in 2023 when compare it to 2022 but the exact rate for the full year is difficult to forecast at this time. Therefore, we’re giving specific guidance one quarter at a time for the near future. With that, we expect first quarter revenue to be in the range of $77 million to $81 million compared to $80.5 million in the first quarter of 2022. Before I turn the call over to Giacomo, I also wanted to touch on the December ’22 Board enhancements. As previously announced, the company added 2 new independent Board members: Kathy Miller and Karin-Joyce Tjon.
Both Kathy and KJ bring extensive experience in previous leadership roles, including CFO, Chief Operating Officers; as well as skills and corporate finance, accounting, financial planning and analysis, treasury, regulatory filings, tax, procurement and investor relations. We are very fortunate to have their experience and we welcome both to the Kaleyra Board. I’ll now turn the call over to Giacomo to detail our financial results.
Giacomo Dall’Aglio: Thank you, Colin. I will now run through our financial results in greater detail. As Dario noted, our total revenue in the fourth quarter was $93.7 million, an increase of $3.7 million versus $90 million in the comparable year ago period and again, above the previous provided projections. The fourth quarter and the full year were both record for revenue. We have a global revenue footprint and a well-balanced portfolio across geographies and sectors. Further supporting this revenue or the customer base with virtually zero churn within our top 10 customers, which account 43.3% of revenues during the fourth quarter. Gross profit for the full year was $70.1 million at 21.9% increase when we compare to $57.5 million for 2021.
For the fourth quarter, gross profit was $17 million compared to $21.1 million in the comparable year ago period. Gross margin for the fourth quarter of 2022 was 18.2% compared to 23.5% of the fourth quarter of 2021. Q4 net losses totaled $57.8 million or $1.28 per share based on 45.2 million weighted average shares outstanding compared to a net loss of $7.3 million or $0.17 per share based on 41.9 million weighted average shares outstanding in the comparable year ago period. Net loss includes an impairment loss of intangible assets of $49.4 million. For the full year, net loss totaled $98.5 million or $2.25 per share based on 43.9 million weighted average shares outstanding compared to a net loss of $34 million or $0.92 per share based on 37 million weighted average shares outstanding in the comparable year ago period.
Adjusted gross profit, a non-GAAP measure of operating performance reported $90 million in the fourth quarter compared to $22.8 million in the fourth quarter prior year and increasing $1 million from the third quarter 2022. Adjusted gross margin for the fourth quarter of 2022 was 20.3% compared to 25.3% in the comparable year ago period. For the full year, adjusted gross profit increased 24.9% to $76.6 million from $61.4 million for the full year 2021. Adjusted gross margin was 22.6% versus 2021 adjusted gross margin of 22.9%. Adjusted net income and non-GAAP measure of operating performance in the fourth quarter was a loss of $4.4 million or $0.10 per basic and diluted share based on 45.2 million weighted average shares outstanding compared to $3.9 million or $0.09 and $0.08 per basic and diluted share based on 41.9 million and 51.9 million weighted average share outstanding, respectively, in the comparable year-ago period.
For the full year, adjusted net loss was $1.2 million or $0.03 per basic and diluted share based on 43.9 million weighted average shares outstanding compared to a net income of $6.1 million or $0.16 per basic and $0.13 per diluted shares based on 37 million and 48.1 million weighted average shares outstanding, respectively, in the comparable year-ago period. Lastly, adjusted EBITDA a measurement of operating performance was $2.5 million compared to $9.6 million in the fourth quarter of 2021. For the year, adjusted EBITDA was $18.7 million versus $18.6 million in the full year 2021. At the end of the fourth quarter, cash, cash equivalents, restricted cash and short-term investment were $78.6 million compared to $97.9 million as of December 31, 2021 or $82.2 million when using 2021 year and foreign exchange rates.
The company has also announced the beginning of its 2023 restructuring and cost reduction program. The program is designed to position in Kaleyra to serve the demand from global businesses to interact with their customer base using existing and emerging communication channels while driving labor and cost efficiency that are available to Kaleyra from its geographical scale. The program seeks to achieve the following goals: one, adjusted EBITDA to exceed 20% growth in 2023 compared to 2022, with additional growth in 2024; two, organization streamline aim to reduce monthly cash payroll cost by more than 15% in 2023; three, increasing net cash provided by operating activities by 2023 year-end compared to 2022; fourth, continued focus on R&D investment to always provide high-quality service standards and offer new products to our customers.
This completes my financial summary. I’d now like to turn the call back over to Dario for his closing remarks.
Dario Calogero: Thank you, Giacomo. In summary, we are pleased with the record top line results we achieved during the fourth quarter and full year. To the broader global economic landscape continues to provoke uncertainty, Kaleyra provides the needed suite of products to its customers, by focusing and investing in ways to layer in our high-growth channels to existing customers, maintaining success winning new customers and consistently expanding our operating footprint, we can expect to keep our new momentum. And with that, we are ready to open the call for your questions. Operator, please provide the appropriate instructions.
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